The Death of the 20 Percent Down Payment
Digested from MarketWatch
Your residents no longer need to have 20 percent down to leave for home ownership, but many of them do not realize it.
Conventional wisdom says you need to put 20 percent of the cost to buy a house. But the stats do not back that up.
A majority of noncash, first-time home buyers, 70 percent, and 54 percent of all buyers made down payments of less than 20% over at least the past five years, according to MarketWatch’s Hal Bundrick, citing data from the National Association of Realtors (NAR).
“The typical down payment for 60 percent of first-time home buyers is six percent or less, according to NAR’s latest data,” Bundrick writes. “But NAR’s research finds few adults 34 and younger [just 13 percent] realize they can buy a house with a down payment of five percent or less.
Despite those stats, may people still believe they need to put 20 percent down to buy a house. Bundrick blames that misconception on the media and the fact that many banks and lending institutions only deal with mortgages that require a 20-percent down payment.
But things could be changing, which could provide a new occupancy challenge to apartment owners. “The ‘traditional’ 20% down payment may become obsolete, even among big lenders. Brian Moynihan, CEO of Bank of America told CNBC in May that lowering the down payment requirement from 20% to 10% ‘wouldn’t introduce that much risk but would help a lot of mortgages get done,’” Bundrick writes.
Even if the single-family market does return, Camden CEO Ric Campo tells NAA that he thinks the boost it will provide to the economy should benefit the apartment industry.
“I have advocated that balanced housing policy is what we need,” Campo says. “It is not that single-family wins and multifamily loses. There is enough to go around. It is better for us if people are building homes because a lot of those people live in apartments.”